Question

Foothill Hospital recorded the following costs for the meals served in its cafeteria during the last seven weeks:

w meals caf costs
1 1500 4800
2 1600 5080
3 1800 5280
4 1450 4900
5 1000 4000
6 1650 5100
7 1900 5800
Using the high-low method, the total fixed costs for the cafeteria are:

Answer 1

Using the high-low method, the total fixed costs for the cafeteria are $2000.

Step-by-step explanation:

The high-low method is a technique used to separate the fixed costs and variable costs of a business. To determine the total fixed costs for the cafeteria, you need to identify the highest and lowest number of meals served and their corresponding costs. Using the given information, the highest number of meals served is 1900 with a cost of $5800, and the lowest number of meals served is 1000 with a cost of $4000.

To calculate the variable cost per meal, subtract the lowest cost from the highest cost, and then divide it by the difference in the number of meals. In this case, the variable cost per meal is ($5800 - $4000) / (1900 - 1000) = $1800 / 900 = $2.

Next, multiply the variable cost per meal by the highest number of meals served to get the total variable costs. In this case, the total variable costs are $2 * 1900 = $3800.

To calculate the total fixed costs, subtract the total variable costs from the highest cost. In this case, the total fixed costs for the cafeteria are $5800 - $3800 = $2000.